Both sides mutually agreed to call off the joint venture, which was kickstarted in 2007; furthermore, the US confectioner will sell its 51 per cent stake to Godrej Consumer Products for an undisclosed sum, reports The Economic Times of India.
However, Godrej’s general manager, Isha Iyer, in statement emailed to ConfectioneryNews.com this morning, said the media reports were “speculative” and that, as a policy, it “did not comment on speculation”.
Company analyst at Euromonitor, Ildiko Szalai, told this publication that Godrej's shares saw a climb of 2.4 per cent this morning, an indication that the market was reacting to the reports of the joint venture collapse.
Slow progress
She notes an extremely slow rate of progress for the joint venture, particularly in respect to Hershey chocolate branded products being released onto the Indian market.
Four years into the partnernship, the US confectioner had only introduced its chocolate syrup brand through the tie-up. Last June, it was reported that the joint venture was set to launch chocolate brands from the Hershey's stable.
Godrej had contributed a number of products through the partnership, including confectionery brands form the Nutrine.
Hershey's will now operate on its own in India through a wholly-owned subsidiary, claims The Economic Times.
Competition from other international brands is fierce in India, particularly in the chocolate segment, where Kraft/Cadbury and Nestle dominate. "India is a consolidated chocolate market, difficult to navigate for new entrants, and one that is much smaller than say China, despite the category being nascent there," said Szalai.
Higher unit prices
In a market overview last month, Euromonitor International revealed that Indian confectionery retail sales grew by seven per cent last year, boosted by “key indulgence categories” such as chocolate and functional gum.
Sugary confectionery, chocolate and functional gum in particular command higher unit prices and are particularly sensitive to an improvement in the economic climate, noted analyst Francisco Redruello.
Improving consumer confidence and increasing disposable income played a positive role in the rising demand for sugar confectionery products, which grew by one per cent in constant retail value terms in 2010.
Meanwhile, chocolate confectionery sales jumped up 13 per cent in constant value terms in 2010, compared to a 10 per cent growth in 2009.